Antitrust law

Scoop: The millionaire funding the campaign to break up Facebook

A Pennsylvania philanthropist and former hedge fund executive named David Magerman was the initial donor behind a high-profile campaign urging regulators to break up Facebook, he confirmed to Axios for the first time on Thursday.

Why it matters: Magerman has given more than $400,000 to the campaign — "Freedom from Facebook" — because he believes Facebook has too much power over how the world communicates. A Republican-oriented consulting firm hired by Facebook had tried to link the campaign to billionaire philanthropist George Soros.

Responding to Axios’ questions by email, Magerman said he felt that Facebook had a “huge financial disincentive to protect users’ data.”

“By combining social media, news distribution, advertising, commerce, and business and political networking, it forces people to engage in its platform, even if they only want one of its offerings,” he told Axios, comparing Facebook’s algorithms to “telescreens” from the novel 1984 that both record people and show them content.

He said his goal was to educate “the public about what Facebook was becoming and whether or not one might want to reconsider engaging with it based on that information.”

Details: Magerman said he has given $425,000 to the campaign so far, starting with a $200,000 donation.

The effort involves a coalition of progressive groups spearheaded by Demand Progress, Citizens Against Monopoly, and its affiliate Open Markets Institute, a vocal critic of Big Tech.

Magerman said that he became interested earlier this year in an effort to inform “the public about the risks of engaging with Facebook.”

"It was my goal to convince people that Facebook is not free, that it exacts a high price from users in the form of their private data, and I think users don't understand that transaction, to all of our detriment."

— David Magerman

An adviser suggested he work with Open Markets Institute, which has helped shape a conversation in Washington about the increasing concentration and influence of major tech firms including Amazon and Google.

“I don't know the details of when and how much they raised outside of what I gave them, but I was the only donor (as far as I know) in the early stages of the campaign,” he said.

He said he does not hold a short position in Facebook or other companies, and has not benefited financially from the effort.

Eddie Vale, a political consultant who helps run the Freedom from Facebook campaign, declined to comment on Magerman's involvement or whether additional donors have funded the effort.

Reality check: Magerman’s funding pales in comparison to Facebook’s lobbying operation. The company spent roughly $11.5 million on federal lobbying last year, according to the Center for Responsive Politics, and employed 11 outside lobbying firms.

The backdrop: A Republican consulting firm — Definers Public Affairs — working for Facebook tried to link the Freedom from Facebook campaign with George Soros, whose Open Society Foundations help fund the Open Markets Institute, the New York Times reported on Wednesday.

The Open Society Foundations denies funding the Freedom from Facebook campaign. Its president criticized Facebook over Definers Public Affairs’ attacks targeted at Soros.

“Nothing surprises me anymore,” said Magerman of the NYT report, calling Soros an “easy target” because he “has had the courage to put his name behind major efforts around the world.” (Soros has been the target of anti-Semitic attacks and conspiracy theories.)

The big picture: Magerman has gotten attention for a past political stand.

He is active in philanthropy through a foundation that focuses on education, and he has donated to Democratic politicians.

Until now, though, his involvement with the anti-Facebook campaign has not been disclosed.

When asked by Axios about funding earlier this year, Sarah Miller, the deputy director of the Open Markets Institute and a key player in the anti-Facebook group, said that “Facebook is willing to spend a ton of money going after competitors and critics, so to protect the people who support this work we aren’t giving out details about our fundraising.”

Magerman said he hadn’t tried to stay anonymous, but simply hadn’t been asked about his involvement until he was contacted by Axios.

“I'm not generally someone who seeks publicity, and I saw no value in announcing my involvement,” he said. “That said, I am proud of what Freedom from Facebook has accomplished, and I am proud to be associated with it.”

Also: On Thursday, Freedom from Facebook filed a complaint with the Federal Trade Commission alleging that Facebook had violated an agreement with the agency and consumer protection law.

Editor's note: This post as been updated to reflect that Demand Progress, not Demand Justice, is spearheading the Freedom from Facebook coalition.

Media deals become Trump's political targets — again

Illustration: Aïda Amer/Axios

Mergers are central to media companies' strategies for competing with tech giants like Google and Netflix, but the merger review process has suddenly become a political football between President Trump and congressional Democrats.

Why it matters: Trump continues to comment on antitrust matters related to media companies he doesn't like, and experts worry the resulting political fray could hinder the Justice Department's ability to independently evaluate mergers.Media companies looking to merge amid an already difficult economic climate now have to consider this reality as a part of their business decisions.

What's happening: Consumer groups are raising red flags about both the AT&T/Time Warner merger that was approved this summer (after the Justice Department tried to block it) and the Comcast/NBCUniversal merger that was approved in 2011 during the Obama administration.

Last week, the American Cable Association asked the DOJ to investigate Comcast/NBCU for antitrust violations.

The president then tweeted about the industry group's letter, asserting that "Comcast routinely violates antitrust laws."

A DOJ spokesperson alluded to Axios Nov. 1 that AT&T's failure to come to a carriage agreement with Dish stems from its desire to steal Dish's Pay-TV subscribers, which would be an antitrust violation.

Be smart: "There is a strong basis for enforcing these laws regardless of the White House's statements, but those statements in no way help the DOJ do its job effectively," says Gene Kimmelman, president and CEO of Public Knowledge, a consumer protection advocacy group, and a former Justice Department antitrust staffer.

Not everyone sees it that way. "I certainly was very happy to see the president focus on this issue," ACA President Matthew Polka tells Axios.

The big picture: These issues become even more convoluted as the DOJ faces a leadership crisis of its own.

The resignation of Attorney General Jeff Sessions has some policymakers concerned that his acting replacement Matthew Whitaker, a Trump loyalist, will push the president's agenda — renewing fears that the DOJ's antitrust division isn't independent from the White House.

Between the lines: Many of the alleged anti-competitive behaviors are related to outlets that Trump has attacked.

NBC: The president has now vocally supported probing Comcast's behavior after its merger with NBCU in 2011. He's also attacked the network's broadcast licenses in the past, even though those are controlled by local affiliates and Trump can't take those away.

CNN: CNN is owned by WarnerMedia (formerly called Time Warner), which was acquired by AT&T in June. The president vowed to break up AT&T's merger with Time Warner on the campaign trail. The DOJ tried to block the deal but lost the case in court. Trump criticized the deal's approval.

Reality check: Schiff’s comments carry weight because of his prominence in the Democratic party. But Schiff's committee doesn't have oversight authority on antitrust matters. Democrats in Congress have already requested documents related to communications between the White House and DOJ about the AT&T deal.

The bottom line: “The changes that take place here are going to be measured in years, not in months,” Andrew Schwartzman of the Communications and Technology Law Clinic at Georgetown Law said of the debate over antitrust law.